The Federal Government and the World Bank have agreed to cancel about $717.7 million in undisbursed financing under the Power Sector Recovery Operation (PSRO) programme.
The development was disclosed in a restructuring document released by the World Bank, following a formal request by the Federal Government on March 26, 2026, seeking the discontinuation of the financing arrangement and early closure of the programme.
According to the document, the cancellation was triggered by worsening tariff shortfalls, implementation delays and changing realities in Nigeria’s electricity sector.
“The restructuring will result in the cancellation of the entire undisbursed balance in the amount of US$717.7 million equivalent, and no further disbursements will be made under the programme,” the World Bank stated.
The lender also announced that the programme’s closing date had been moved forward from June 30, 2027, to May 31, 2026.
The PSRO was introduced to support reforms in Nigeria’s power sector and initially recorded notable progress after its approval in 2020.
The World Bank said tariff shortfalls dropped by 71 percent between 2019 and 2022, declining from N581 billion to N166 billion, while cost recovery improved from 56 percent to 94 percent.
However, the gains were reportedly reversed after the liberalisation of the foreign exchange market in June 2023, which led to a sharp depreciation of the naira.
According to the bank, the development significantly increased the cost of gas used for electricity generation, as over 70 percent of power supplied to the national grid is generated from gas priced in dollars.
The bank further noted that electricity tariffs remained largely unchanged since early 2023, except for Band A customers whose tariffs were adjusted in April 2024.
It said the mismatch between electricity generation costs and sector revenues caused tariff shortfalls to rise sharply from N140 billion in 2022 to about N1.9 trillion annually in 2024 and 2025.
The World Bank also revealed that only nine percent of the additional $750 million financing approved in 2023 had been disbursed due to delays in implementation and failure to meet key reform targets.
Consequently, the programme’s implementation rating was downgraded from “satisfactory” to “moderately unsatisfactory”.
Despite the cancellation, the bank said achievements already recorded under the programme would remain valid, adding that the Federal Government plans to continue power sector reforms through alternative financing arrangements.
The document showed that the programme had total commitments of about $1.51 billion, out of which approximately $798 million had already been disbursed before the cancellation.
